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ELECTROLUX

Electrolux profits below expectations

Swedish home appliance giant Electrolux posted a 25 percent second quarter profit increase on Tuesday, missing expectations, but its outlook for 2006 was the same.

The company reported a pretax profit excluding extraordinary items of 765 million kronor, while sales were 25.32 billion kronor. Sales were expected to reach 25.76 billion kronor, up from 24.24 billion kronor.

Electrolux said in its report that it planned on partnering with Japan’s Sharp to create a frost free refrigerator that will be made at the Sharp plant in Thailand and would be out later in 2006.

ELECTROLUX

Sweden’s Electrolux sees big US deal stopped

UPDATED: Shares in Swedish white goods giant Electrolux plummeted on Monday morning after US firm General Electric, which was poised to sell its appliance division to the Nordic firm, cancelled the agreement.

Sweden's Electrolux sees big US deal stopped
Electrolux's office in Kungsholmen, Stockholm. Photo: Fredrik Persson/TT
Electrolux, which sells brands including Frigidaire, AEG and Zanussi as well as its own name, is already the world's second-largest home appliance maker after Whirlpool.
 
It announced a year ago that it wanted to buy part of General Electric (GE).
 
But the US firm said on Monday that it has decided to cancel the agreement to sell its appliance division to the Swedish group which had offered last year to buy it for $3.3 billion.
 
The US Department of Justice had threatened to sue Electrolux and GE over concerns the deal would create a duopoly and hand Electrolux a US market share of some 40 percent.
 
Electrolux said it had made extensive efforts to obtain regulatory approval, and said it “regrets” that GE had terminated the agreement while the court procedure was still pending.
 
“Although we are disappointed that the acquisition will not be completed, Electrolux is confident that the Group has strong capabilities to continue to grow and develop its position as a global appliances manufacturer”, said Keith McLoughlin, President and CEO of Electrolux in a statement.
 
Shares in Electrolux — one of Sweden's most famous brands — initially dropped by 14 percent after the decision was announced, and remained 12 percent lower by mid-morning.
 
The failed deal has already cost the company millions of kronor in preparatory work and General Electric has requested a termination fee of $175 million.
 
GE revealed in a statement that it was still interested in selling the appliance division.
 
Monday's announcement took some analysts by surprise.
 
“I was surprised this deal was contested by the Justice Department, but then when we saw what their concern, which was the creation of duopoly in a part of the appliance market, it began not to look so good,” said Karri Rinta, an analyst with Handelsbanken Capital Markets.
 
“It's back to square one for Electrolux in North America. This is a deal that would have made them much stronger in the US especially against Samsung and LG,” he said.